Just as Social Security is the third rail of politics, “SAVE MORE” is the third rail of personal finance.
We all know we should save more. Some people simply can’t and conflict results when we tell people where they SHOULD be, financially.
The original article in MarketWatch, Money Milestones: This is how your finances should look in your 30s, is probably accurate in a one-size-fits-all, straight-line thinking world – where people graduate high-school, go to college, study engineering, get a job paying $60k plus and are on the lifetime cycle of work – review – raise – job hop for bigger raise – work – review – raise – repeat…
And, if you fit in this category, then the article absolutely applies. You SHOULD have 2X your salary saved when you are 35. And the older you get the more eye-popping these numbers are. If 4% is your “safe withdrawal rate,” then upon retirement you need to have 25 times your annual spending in a blend of portfolios spinning off a lifestyle supporting income stream for the rest of your life.
But, what if you don’t fit the category. If, for whatever reason, you make $10 / hour and you don’t have any real prospects in your community and you don’t see the opportunity to move where the prospects are better and you can’t imagine it being any different; then, should you have the same expectations?
If your wife is diagnosed with cancer and you are fired from your job because you are consistently late because she needs a ride to her chemo treatments in a neighboring town and just the co-payments on her treatment have burned through all your savings; then, should you have the same expectations?
NO! And, if you are writing in the financial press, you should take note – there are a lot of people in these latter categories. The median household income in the U.S. is $59,000 (According to the U.S. Census Bureau). This means ½ of the households in the United States have incomes under $59,000.
We have to remember that the simple, basic costs of living are increasing all the time. The lower your income, the higher the percentage of that income is required to cover your basic needs and the lower your ability to save. At the lowest income levels, you cannot save. This is just simple math.
For someone in this position, it isn’t aspirational to see that they SHOULD have 2X their salary in savings when they are 35… it’s just impossible. It is so impossible that it is depressing.
Queue rage response: Katie Warren, in Business Insider, says, “An Article says you should have twice your salary saved by the time you are 35 – and people are enraged.”
None of the rage questions the math or the importance of 2X salary as a good goal. The rage states plainly, IT. IS. NOT. POSSIBLE.
If we cut social security for people who are relying on social security for rent and food – even if they are relying on it 15 years from now – then, we are forcing them be homeless and hungry. This is callous.
If we tell people, for whom it cannot be done, that they SHOULD have 2X their salary saved when they are 35; then, they will feel as if they have failed, personally. They will lose hope. And they will be de-motivated. These are human beings responding to the impossible. Sure, it is a good goal; but it is an impossible requirement.
Look around you. If you are lucky enough to be on the work – review – raise – new job – bigger raise cycle, then you will have to look beyond your peer group to see people who are not participating in the cycle.
When you do see them, it would be best if you reserved judgement and exercised compassion.
There is no one-size-fits-all. As a child, all my friends had more than we did. My family was broke until after I graduated from college. Now my parents are doing pretty well financially, but it was a long road that didn’t really start until they were in their 40s and 50s.
And, that is how it may be for you. You may struggle and work hard and sweat and bleed and even cry in your 20s and 30s because you can’t save a penny. That is the house I was raised in. It’s all I knew growing up. And, we are OK. My parents are OK. I’m OK. My brother is OK.
Today, at 46, I am part of America’s New Aristocracy – I am in the stable 9.9% below the incredible growing wealth in the top .1%. This means my kids are likely to see opportunities, go to college, and benefit in ways that many people’s kids will not.
I am so grateful that my parents didn’t give up when I was young. I am so grateful they made me take my schooling seriously. I am so grateful that Allied Van Lines hired me when I was 13 so I could earn some money and ultimately get to college. I have worked really hard… but so do many other people who haven’t been as lucky. I should be (and am very much so) grateful for all the luck I have had.
There is no should. There are just trade-offs.
One off my coaches says, “I wish I could get people to stop ‘should-ing’ all over themselves. There are many paths. Each path is a process. The only place you can begin is where you are. Be compassionate for those who haven’t gotten the breaks and be grateful for the breaks you have gotten.